Personal Loans

How a personal loan works?

This type of loans are usually loans that have prefixed installment payments every month. They are normally unsecured, which means that they do not have any collateral and are perceived riskier for the lender. The higher rates on these loans are a consequence of the absence of collaterals as a warranty for the repayment of the debt.

Personal loans are evaluated by creditworthiness of the borrowers, including income level, credit score, employment, properties, family expenses, etc. The criteria might change, according to the lender you choose.

When getting a personal loan, make sure you have the terms clear and agree with them, such as:

• > The interest rates and APR’s

• > The length of repayment and its dates

• > The monthly payments

• > Origination fees and others

Features of a good personal loan

• ★ Low interest rates: A good personal loan should have a fair and low interest rate, in order to be realistic and reasonable with the borrower’s conditions. 

• ★ Easy to repay: Making repayment easier for the customers increases the chances for them to pay on time and avoid any extra fees. The lender’s may try to adapt to the capacity-of-payment dates of the borrower, as well as be flexible with the repayment scheduling design.

• ★ Basic requirements only: Personal loans are special because they do not demand to meet a lot of specific requirements, but to present minimal requirements to prove identity and any sort of payment capability and you should be good to go.

• ★ The less the fees, the better: A good loan is straight up with fees and extra charges. When this happens, make sure your lender is being transparent with the extra amounts and fees they might charge you for, as well as picking the loan that has smaller amounts in them.

• ★ Fast availability of the money in your account: Good personal loans tend to be fast and make the money available within minutes or hours. It shouldn’t take more than a few days at its maximum.

Pros and cons of a personal loan

What can a personal loan be used for?

Personal loans have the advantage of being versatile. They do not require to be used for specific purposes so it gives you the freedom to be spent in whatever your need to, such as:

• ➨ Expensive purchases: These loans can help you cover big purchases such as technology gadgets, jewelry, appliances, mattresses, furniture, etc.

• ➨ Consolidate debt: You can make a debt consolidation under your personal loan, which should have lower rates and better payment conditions than your other multiple debts.

• ➨ Medical bills: if you do not have any health care benefits, your loan can be the solution for medical expenses and medicine.

• ➨ Home improvements: Fixing your house sometimes is necessary and inevitable. Borrowing for it can not only solve an immediate need at home but also help you improve your living.

• ➨ Wedding/Divorce expenses: Both of them can end up being wildly expensive - sometimes weddings can demand huge amounts of money -, a loan can be the solution to make it more affordable and do it under your own conditions.

• ➨ Moving expenses: Moving from one place to another sounds amazing but it is not always like that. It not only demands a lot of time and effort, also requires to spend some good bucks in transportation and professional movers.

• ➨ Vacations/trips: Probably not the best idea but if you are really trying to go on a trip, this can also be a way to finance it with lower rates. You can also try to afford it using a credit card.

• ➨ Small business: If you do not need many funds for that small business you have been trying to open, this loan can help you get started.

• ➨ Emergencies: For any emergency you can have on your way, a personal loan can be a lifesaver.

Lenders for Personal Loan

There are multiple lenders that offer personal loans under different terms, conditions and requirements. 

• Bank/credit union personal loans

Traditional lenders such as banks and credit unions offer many personal loan options and give you the possibility to apply either online or in person in one of their offices locations. 

• Online Lenders

Nowadays, online lenders are very popular and offer easy online applications and other requirements benefits. Peer-to-peer sites like Upstart or LendingTree are good and safe options that analyze customers with use alternative credit scoring models. Marketplaces like Kreditiweb are online tools that help you find the best personal loans throughout different online and traditional financial institutions.

• Line of credit 

It is an open-ended personal loan that applies interest depending on the amount borrowed. These are normally provided by financial entities through secured loans (home equity loans) or unsecured loans (credit cards).

Requirements for a personal loan

Personal loan requirements might change depending on the lender you pick to finance you. But some of the general and common requirements are:

1. Be at least 21 years old

2. Income and/or employment proof

3. Identity documents (ID, passport, SSN)

In other cases, the lenders might ask you to meet other additional requirements such as credit history, proof of education, collateral, cosigner status, location within the entity ratio (i.e. some credit unions), etc.

If you are ready to find the best personal loan for you, we match you with the options that suit you better and meet your requirements. Start now